Spending continues to moderate, rate cut may be on cards

by Julia Corderoy28 Apr 2015
Economy-wide spending has slowed to its slowest pace in just over two years ahead of the Reserve Bank’s cash rate meeting next week.

According to the Commonwealth Bank Business Sales Indicator, spending rose by 0.2% in trend terms in March, after similar gains in January and February. Annual growth slowed to 5.7%, the slowest growth in just over two years. 

Craig James, chief economist at CommSec says the current annual growth rate of spending is still slightly faster than the decade-average pace of 5.3%, however he doesn’t expect any big rises in spending soon.

“Consumers have some extra money in their wallets through a combination of low rates and cheaper petrol, and the latest result shows they’re out there cautiously spending. 

“However, influences such as a lower Aussie dollar and the upcoming Federal Budget may be filtering down to soft consumer confidence and as such we don’t expect a big rise in spending. It is important to note that wage growth is only marginally ahead of the inflation rate.”

As a result, James says that the Reserve Bank will consider cutting rates at the May Board meeting.
 

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